Digital Currencies and the Potential they Hold for Small Businesses

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“So my view’s quite clear. I believe cryptocurrencies, Bitcoin is the first example, I believe they’re going to change the world.” 
–Richard Brown, executive architect, IBM

The recent credit card breach at Target, is testament as to why modern currency needs reform. The crisis which resulted in the compromise of millions of customer’s credit card information, points to the fact that the typical “swipe and sign” method is becoming risky. By switching to encrypted digital currencies like Bitcoin, businesses can conduct safe and risk-free transactions.

Online companies like TigerDirect.com are now accepting Bitcoin in exchange for electronics and computers. This is a transition that leaves small businesses behind with nowhere to go but forward. To be a part of this future, these small businesses need to embrace and start accepting digital currencies.

Bitcoin is called “peer to peer money” and essentially, it is online cash. Anyone and everyone can use it anywhere in the world.

One highlight that should be taken away from this video is that Bitcoin is regulated by secure networks backed behind incredibly complex algorithms. These networks allow individuals to securely collect and trade Bitcoin using digital wallets. This is what sets Bitcoin apart from other services like Paypal.

Since being introduced in 2008, Bitcoin has gained popularity, making it a more prominent payment method. This chart from Quandl.com depicts the increasing number of Bitcoin transactions since August 2010.

Number of Bitcoin Transactions

To counter the argument that these transactions are being made by the same few people, Quandl.com also provides a graph showing the amount of different Bitcoin addresses used.

Unique Bitcoin Wallets

With a unique system as simple as this, why wouldn’t a business want to implement it?

In tech savvy cities like San Francisco, you can even use your Bitcoin at the Farmers’ Market. This type of advancement benefits businesses in several ways. By inviting customers to make a purchase with Bitcoin, the business has just attracted a new range of customers. Services like www.Coinmap.org display nearby retailers who invite Bitcoin bearing shoppers. In November, 2013, the number of businesses on Coinmap increased 81%. This is a great tactic for free advertising which can drive more interest and discussion in a business.

Another added benefit: there are no transaction fees associated with Bitcoin like there are for credit cards or PayPal. Setting up BitPay (the software used to manage Bitcoin transactions) costs very little and is easy for any employee to use.

With all the advantages of using Bitcoin, are there any drawbacks? In short, yes.

A big concern is its volatility. At the time this article was written, the exchange rate of one Bitcoin was equivalent to $638.8 USD. The fluctuation draws criticism from many including investment guru Warren Buffett. While this is a reasonable cause for speculation, it is most important to note that digital currencies just begun to take off. There is no doubt that over the next decade, kinks will be adjusted and digital currency will be even more feasible and safe.

For small businesses in non tech savvy cities, this concept is hard to embrace and might be out of the question. Digital currency is the future. With minimal costs, easy to use software, and an increase in brand awareness, it is a practical next step for small businesses. If more companies adapt and integrate this system, it could help change the world, making consumer transactions easier and safer.

 

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